How do different types of stablecoins work?

Stock Point
1 min readApr 24

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Earlier in this post, we already dealt with the topic of stabelcoins. Butw there is another important thing we want to tell you about, and that is the types of Stablecoins.

📷 Just in case, let us remind you that Stablecoins are cryptocurrencies with a stable price, which is not subject to volatility and remains unchanged.

There are three types of stablecoins in particular:

➡️ Secured by fiat currencies (fiat-collateralized)

In this approach, each steblycoin coin is tied to one unit of fiat currency — USDC, Tether (USDT), TrueUSD (TUSD), Binance USD (BUSD);

↪️ Secured by cryptocurrencies (crypto-collateralized)

Stablecoin creator creates a reserve in collateralized cryptocurrency, the estimated value of which exceeds the value of the stablecoin. Even if the market experiences a significant drop in the price of the cryptocurrency with which the stabelcoin is collateralized, the latter will retain its value due to overcollateralization — DAI;

➡️ Non-collateralized

They are based on such an economic process as senorage. In simple words: if the value of one stabelcoin exceeds $1, the supply increases (i.e. new coins are issued), and when the value is less than $1, the supply decreases (i.e. coins are “burned”) — Basecoin, Carbon, Havven.

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